Earnings, whether you use forward or past 12M EPS, are a bit over 1$. With the stock at 65, I think the PE is unsustainable, unless the rosiest future happens (out of several possible futures). Specifically, QCOM has to continue to get more big licensing agreements, and sales of 1X chips have to ramp rapidly. If that doesn't happen, or if that scenario just looks uncertain, QCOM revisits 50 real quick. Since the rosiest future is already in the stock, IMO, I don't expect any pop in the stock unless unexpected important new news comes out, and I consider that unlikely. Shortterm, there is little upside, and a lot of potential downside. Disclosure: I've been wrong more often than right, on shortterm QCOM moves.
The 2002 estimate is 1.30
At today price (63.77) that gives Qualcomm a P/E of 49
That's roughly 25% EPS growth i think. First, Qualcomm deserves a higher multiple that other wireless stocks for a few reasons..(1) high margin business (2) expects to earn .25 cents next quarter which is equal to last year. Other wireless companies are annoucing decline EPS and margins. (3) companies with predictable and strong earnings are getting higher multiples in today's market.
So is the P/E sustainable? Sprint has said that they plan that all new subs in 2Q02 will be CDMA1x and 80% in 1Q01. I'm not sure if it's fair to say that the rosiest future is already priced into the stock. Looking at the foward 12M EPS i guess you could say that, but i feel that next year's EPS could be low. I don't know if i'd go as far to say Qualcomm is undervalued or even fairly valued, but is it overvalued?
Jacob, have you put equal amounts of money in EMC and NTAP or are you overweighted in one of them? |
